OpenStack Cloud Business Tops $600M in 2013, Over $1B by 2015

By Sean Michael Kerner |
Posted 2013-10-24

OpenStack Cloud Business Tops $600M in 2013, Over $1B by 2015

After just three years in the market, the open-source OpenStack cloud platform is already maturing rapidly and generating revenue for its backers. A new market sizing report from analyst firm 451 Research pegs the OpenStack market as being on track to generate $600 million in revenue in 2013, with more than $1 billion in revenue forecast by 2015.

OpenStack got started in 2010 as an open-source cloud computing project led by Rackspace and NASA. The initiative now includes some of the biggest names in the IT industry, including IBM, Cisco, Dell, Hewlett-Packard and AT&T, among others. The OpenStack Havana milestone update was released last week, furthering the technological capabilities of the platform and the ambitions of the vendors that support it.

Service providers are a key group that can benefit from OpenStack. According to the 451 Research report, service providers will account for $486 million of total OpenStack market revenue in 2013. And that number will grow to $680 million in 2014, according to 451 Research forecasts. In 2013, OpenStack co-founder Rackspace represents approximately 70 percent of the total OpenStack 2013 market share.

"Given that Rackspace has had its OpenStack powered cloud products available in the market for over a year and well before any other OpenStack product/service was available, it makes sense that a research firm estimating market size would conclude that Rackspace has a large share of market," Scott Sanchez, director of strategy at Rackspace, told eWEEK.

Distributions

Following the service providers in terms of revenue are the OpenStack distributions. 451 Research estimates that OpenStack distribution vendors will bring in $82 million in 2014.

"Distributions account for 8.4 percent of the 2013 total and 9.2 percent in 2014 based on bottoms-up estimates," Al Sadowski, research director at 451 Research, told eWEEK.

There are a number of vendors in the OpenStack distribution space, including Canonical, SUSE and Red Hat. Stephanie Wonderlick, director of corporate communications at Red Hat, told eWEEK that it's still in the early days of commercial OpenStack deployments, particularly for enterprise customers.

"Based on the strong interest we've seen in both Red Hat Enterprise Linux OpenStack Platform and Red Hat OpenStack Cloud Infrastructure Partner Network, we believe the commercial market for OpenStack will continue to grow," Wonderlick said. "Our recently released OpenStack survey results reinforce this, showing that enterprises are planning for and moving to OpenStack—an overwhelming 84 percent of survey respondents said that OpenStack is part of their future cloud infrastructure plans."

Hardware

451 Research also breaks out its forecast for a group that it calls "IT Services and Turnkey Vendors." That group includes Nebula and Piston Cloud Computing, two companies founded by former NASA employees that helped to start OpenStack. The forecast for the entire OpenStack IT Services and Turnkey Vendors group is for 2014 revenue to come in at $50 million.

Big hardware vendors including Cisco are also active in the OpenStack market, though it is difficult to specifically quantify the associated revenue.

OpenStack Cloud Business Tops $600M in 2013, Over $1B by 2015

"We included Nebula in our estimate as it offers a purpose-built hardware and software platform for OpenStack," 451 Research's Sadowski said. "As for Cisco, IT or networking hardware that could be utilized in any environment was not included in our latest estimate."

As the market matures and major equipment providers begin to break out OpenStack-specific revenues, 451 Research will evolve its OpenStack estimates, Sadowski said.

Future Growth

OpenStack Foundation Chief Operating Officer Mark Collier told eWEEK that he likes the 451 Research forecast, but he thinks there is even more room for overall growth.

"If there is one area that I think might grow even faster than forecast, it would be public clouds, due to the number of telcos and cloud hosting companies expected to launch services over the next year across the globe," Collier said.

Rackspace's Sanchez is also very optimistic about continued acceleration for OpenStack in the coming years. He noted that the growth of the OpenStack ecosystem over the past three years has been nothing short of incredible.

"When you get the top vendors and top users in a large number of segments and industries all working together, a big market for related products and services develops," Sanchez said. "There is no doubt in my mind that the growth of the overall OpenStack market will continue to accelerate over the next 12-18 months."

Even with the rapid growth of OpenStack and its future optimism, in terms of revenue, it still has some distance to cover before it displaces the current industry leader—Amazon.

"The OpenStack platform has an impressive roster of industry supporters and a vibrant community of developers, but it has a long way to go before it unseats Amazon Web Services in terms of customers, or revenue," 451 Research's Sadowski said.

Sean Michael Kerner is a senior editor at eWEEK and InternetNews.com. Follow him on Twitter @TechJournalist.